The United States Federal Reserve (Fed) has published its new ethical regulations with the aim to maintain the confidence of citizens in the impartiality of the institution, months after it became known that several of its senior officials had carried out million-dollar operations in the markets during the pandemic.
The organism already reported in October that tightened the rules to operate in the markets to its most senior staff, but this Friday has revealed new details that largely prohibit individual activity in the stock markets.
Under the Fed’s new code of ethics, high-ranking officials are prohibited from buying stocks or shares of sectoral funds. They are also prohibited from holding investments in individual bonds, securitizations, cryptocurrencies, commodities or foreign currencies.
Likewise, the central bankers will also not be able to sign contracts trading derivatives, short selling or buying any type of security on margin (leverage).
In any case, any purchase or sale of the securities in which they are allowed to invest will be reported to the ethics committee 45 days in advance and obtain the go-ahead for said transaction. Any investment will have to be kept in the portfolio for at least one year, although any transaction will be prohibited during “stress” events in the markets.
In addition, the presidents of the 12 regional central banks of the Fed will have to communicate to the public their transactions 30 days after doing them. Likewise, the financial breakdowns of the presidents will be posted on the websites of their regional central banks. Until now, they were only accessible through a transparency request.
The review has been carried out at the request of the president of the Fed, Jerome Powell, after it became known that the presidents of the Federal Reserve Banks from Dallas and Boston, Robert Kaplan and Eric Rosengren, respectively, had carried out multimillion-dollar operations on the stock market.
Kaplan and Rosengren, who resigned in September, are two of the 12 bank presidents regional centrals into which the Fed is divided in the United States. Those 12 presidents take turns attending the Federal Open Market Committee (FOMC) along with the chairman of the Fed and the rest of the governors of the Board, who are permanent members. The FOMC is the body in charge of deciding monetary policy, including asset purchases and interest rates.
During 2020, Kaplan made a number of trades worth $1 million or more in securities such as Apple, Amazon o Tesla. From his side, Rosengren acquired stakes of more than a million dollars in four REITs, despite the fact that during the past year he publicly warned of the risks of the real estate market.
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